Posts Tagged ‘Mike Lux’

These days when people ask about health reform, I’m reminded of Gandhi’s visit to England in 1931. Somebody asked him what he thought of “Western civilization” and his answer was, “I think it would be a good idea.”

That’s how I feel about health reform: It would be a good idea.

The truth is that what we’ve been calling health reform doesn’t really “reform” the system at all. It mostly shifts responsibility from one part of the economy to the other. While the Senate’s misguided excise tax places undue and unfair pressure on working people’s health plans, both bills squeeze the middle-class enormously. How? By mandating the purchase of costly and inefficient private insurance, in order to create conditions where the lower-income uninsured can receive coverage. Maybe we should call it “health inefficiency redistribution” instead, since the few cost-containment provisions are in all likelihood being oversold.

That said, the current House and Senate bills would both accomplish some very important things. But these bills do little to lower costs, and it didn’t have to be this way. This seems like a good time to get out of the weeds and look at the situation from a slightly broader perspective.

Here are some thoughts that might help sketch the outline of real reform:

People don’t understand how the money really flows in InsuranceLand.

Ezra Klein will point out that insurance company profit margins are low. They are, but as I pointed out here, the really big insurers have better-than-average margins – and most people are covered by really big insurers.

Even more importantly, margins are artificially low for health insurers. Think of it this way: Let’s say you hire me to pay your bills for $5 each. The first bill is for $1,000, so I charge you $1,005. My profit margin is very low (0.5%), but I just made five bucks and all it took was a second to write the check (and 42 cents for the stamp). Sweet. If I do that 10,000 times I day I’m rolling in cash … and I when I bitch about my profit margins, it’ll sound reasonable to lots of Democrats and liberals.

With the cost inflation we’re seeing, health insurers aren’t “managing” anything. Like my example above, they’re just writing checks. They should be treated that way – as overpaid performers of a clerical function – until they demonstrate that they can do their jobs better. We could make some accounting changes, too.

The idea that insurers have to pay 90% of whatever they charge for medical expenses sounds good, but …

if that happens, what’s the one sure way to make sure they have more profit in the years to come? Charge more! If you only get to keep ten cents on the dollar, the only sure way to get more money is to collect more dollars. Don’t think they’d do that? I hope you’re right. But at a minimum, it certainly doesn’t give them much incentive to lower costs, does it?

There are more creative ways to accomplish the same goal – and give them the right incentives.
We already have single-payer in most of the country – but it’s private single-payer.

So the Medicare expansion, even if it’s not diluted any further, is a backdown from a compromise proposal that was a itself compromise from the Democrats’ 2008 campaign pledges – pledges which were themselves less than what most experts felt needed to be done. A compromise of a compromise of a compromise of a compromise: I’ll let others decide if that’s the best we can expect from (and for) our nation.

Any good news? Sure. Both the Senate and House bills provide insurance to the lower-income uninsured (although the subsidies are too weak), create portability for people with pre-existing conditions, and limit out-of-pocket costs. (Note that I said limit and not reduce. From what I’ve seen, neither bill would lower those costs much, but they’d cap them.) But would the bill be “a pretty remarkable accomplishment,” as Mike Lux put it? Only if you grade on an extremely steep curve – one in which an “A” is not the health reform we should have, or even the one that was promised by Democrats in the 2008 election, but is the result of a process that seemed to lack the best our leaders can offer in the way of imagination and decisive leadership.

Maybe, once the bill is passed, we could use the enormous reservoir of talent our leaders possess to begin work on real reform. The work won’t end then – it’ll just be beginning.

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The Sentinel Effect:

The Sentinel Effect: The theory that productivity and outcomes can be improved through the process of observation and measurement. Based on the now-controversial 'Hawthorne study' of the 1930's.

Richard Eskow is CEO of Health Knowledge Systems (HKS) in Los Angeles, which provides services to the healthcare and workers’ compensation industries. Through Eskow and Associates, Richard is also a consultant specializing in healthcare and insurance, IT, strategic planning, and communications. Most clients are in the IT and health-related industries, although Richard has also worked with NGO’s, state and national governments, and in the entertainment industry.

Richard had senior executive positions at several Forture 500 firms and was CEO of two medical management companies before forming HKS. He also served as a senior consultant to the World Bank, the U.S. State Dept/USAID, and government and private entities in over 20 foreign countries. Areas of expertise included health policy, healthcare investment, operations, marketing, and strategic planning.